Correlation Between Micron Technology and Icelandic Salmon

Can any of the company-specific risk be diversified away by investing in both Micron Technology and Icelandic Salmon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Micron Technology and Icelandic Salmon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and Icelandic Salmon AS, you can compare the effects of market volatilities on Micron Technology and Icelandic Salmon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Micron Technology with a short position of Icelandic Salmon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Icelandic Salmon.

Diversification Opportunities for Micron Technology and Icelandic Salmon

-0.13

Correlation Coefficient

Micron Technology  Icelandic Salmon

Good diversification

The 3 months correlation between Micron and Icelandic is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Icelandic Salmon AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icelandic Salmon and Micron Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Micron Technology are associated (or correlated) with Icelandic Salmon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icelandic Salmon has no effect on the direction of Micron Technology i.e., Micron Technology and Icelandic Salmon go up and down completely randomly.

Pair Corralation between Micron Technology and Icelandic Salmon

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.52 times less return on investment than Icelandic Salmon. In addition to that, Micron Technology is 2.47 times more volatile than Icelandic Salmon AS. It trades about 0.01 of its total potential returns per unit of risk. Icelandic Salmon AS is currently generating about 0.02 per unit of volatility. If you would invest  143,000  in Icelandic Salmon AS on October 20, 2024 and sell it today you would earn a total of  2,000  from holding Icelandic Salmon AS or generate 1.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Micron Technology  vs.  Icelandic Salmon AS

Micron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Icelandic Salmon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Icelandic Salmon AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Icelandic Salmon is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Micron Technology and Icelandic Salmon

The main advantage of trading using opposite Micron Technology and Icelandic Salmon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, Icelandic Salmon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Icelandic Salmon will offset losses from the drop in Icelandic Salmon's long position.

The idea behind Micron Technology and Icelandic Salmon AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.